The coliseum itself will not be part of Patch 3.1 and will be introduced in a later content patch. Blizzard plans many events centered around the Argent Tournament and plans to roll them out over time. Zaryhm confirms that the coliseum, or the event proper, will be instanced and will not be PvP-related. He also explains that the Argent Tournament is a concerted effort from all the capital cities, and players will earn the chance to represent their city of choice in the eventual battle against the Lich King.
For those concerned about the lore behind this seemingly festive jousting tournament, Zarhym states, "Tournaments and competitions like this may seem like trivial games in times of real struggle against the Scourge, but it's also an opportunity to rally those who oppose the Lich King through blood sport." Nothing like a little knight's tale to get players pumped for battle, I suppose.